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NODX in sharp 9.7 per cent year-on-year fall in February (Amended)

This is the steepest plunge in 2 years and comes after 3 straight months of growth; economists say exports are patchy, Q1 GDP growth weak

Feeble global demand, especially from China, and restructuring pains continue to weigh on Singapore's manufacturing sector, said Chua Hak Bin of Bank of America Merrill Lynch.


NON-OIL domestic exports (NODX) fell an unexpectedly sharp 9.7 per cent year-on-year in February, the latest in a growing list of dismal indicators pointing to weak growth in gross domestic product (GDP) in the first quarter.

While the NODX's drop was exaggerated by a shorter working month because of the Chinese New Year, private-sector economists who smoothened out the seasonal effect by aggregating the February and January data still found that NODX had dipped 2.4 per cent.

Nomura Singapore, in a brief by Euben Paracuelles and Brian Tan, said: "This suggests exports remain patchy. Overall, average January and February seasonally adjusted NODX levels are 2.8 per cent below the average in Q4 2014, which is consistent with our view that manufacturing activity is soft but not collapsing."

NODX's drop last month - bigger than the 0.9 per cent dip economists had projected - was the steepest in two years, and came after three straight months of growth - 0.8 per cent in November, 1.3 per cent in December and 4.3 per cent in January.

Month on month, the NODX declined by a seasonally-adjusted 9.4 per cent, according to the latest trade figures released on Tuesday by International Enterprise Singapore, the government's trade-promotion arm.

The last time the NODX fell by so much was in March 2012. Still, though it has happened before, the fall this time, coming after a 1.6 per cent month-on-month rise in January, was far sharper than expected. Economists were looking at only a 0.3 per cent slip.

Except to South Korea, the US, Thailand and Malaysia, NODX shipments to Singapore's top 10 markets tumbled in February; China, Japan and Taiwan were the three top contributors to the NODX's poor showing.

The electronic NODX, up 5.5 per cent in January, slipped 12.5 per cent year on year last month - the weakest since May 14, when the electronic NODX fell 15.3 per cent, OCBC's Selena Ling said.

The non-electronic NODX dropped 8.5 per cent, after a 4.4 per cent increase in the previous month.

Taking January and February, the electronic NODX fell 3.5 per cent, while the non-electronic NODX also dropped 3.5 per cent, said UOB Bank's Francis Tan.

Michael Wan of Credit Suisse said: "This set of dreadful export numbers seem to fit with the weak Q1 export numbers that we have seen across Asia, with China the key exception."

While the NODX in recent years has been less well-correlated with GDP growth, he said, the data that came in lately, like those of the industrial production, retail sales and the NODX, were all broadly indicative of weak GDP growth in the first quarter for Singapore.

"This fits in with the lead indicators that we track for Singapore, such as the manufacturing PMIs and the CSBMI index, all of which point to a weak near-term growth outlook," he said.

He estimates that the GDP could dip by around 0.6 to 0.8 per cent quarter-on-quarter annualised in the first three months of this year, or rise just 1.5 to 1.6 per cent year-on-year, against a 2.2 per cent rise in the previous quarter.

Citigroup's Kit Wei Zheng said: "While divergences with industrial production numbers (which were down in January) make it difficult to draw precise implications for Q1 GDP from February's trade data, we sense a 2 to 3 per cent quarter-on-quarter contraction is likely, which raises the risks that the Ministry of Trade and Industry may downgrade the official GDP forecast (for 2015) to 1 to 3 per cent come May."

Chua Hak Bin of Bank of America Merrill Lynch said feeble global demand, especially from China, and restructuring pains continue to weigh on Singapore's manufacturing. "Poor NODX readings so far this year reaffirm our expectation of weak GDP growth in the first quarter."

He projects that first-quarter GDP growth will come in at "close to or below 2.0 per cent".

But non-oil re-exports were up 0.9 per cent year-on-year last month, he noted, bringing the January-to-February growth average to 7.2 per cent, much stronger than the fourth quarter's 1.8 per cent.

"This suggests some support to externally-oriented services sectors in Q1, in particular transport and storage and wholesale trade," he says.

Citigroup's Mr Kit pointed to another "silver lining" in February's bleak trade numbers - the seasonally adjusted 94.5 per cent month-on-month rebound in non-oil retained imports of intermediate goods, after a 59.5 per cent plunge in January.

"(This) could signal a turnaround in production in the coming months," he said.

Amendment: An earlier version of this article incorrectly stated that NODX grew 1.3 per cent in December; the electronic NODX was up 5.5 per cent in January; and the non-electronic NODX rose 4.4 per cent in January. The figures should have been 2.3, 5 and 4 per cent respectively.

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